Posts Tagged ‘Child poverty’

Britain’s Chancellor of the Exchequer, Alistair Darling is praising Keynes – along with just about everyone else. He’s boosted public spending (go here). The present focus on fiscal policy reflects the fear of a ‘liquidity trap’ – which Keynes first identified in the 1930s. The Bank of England is set to cut interest rates further, but this might not encourage banks to lend. So monetary policy alone can’t do the trick (it is said). Hence public spending. And now tax cuts.

Today we hear the Chancellor’s plans (at 3.30 pm: go here). The government’s spin machine was busy over the weekend so a VAT reduction will hardly come as a surprise. The FT reckons it will be a £12.5 bn package:

“At the heart of the stimulus package is an expected “temporary” cut in the VAT rate from 17.5 to 15 per cent, the lowest standard rate allowed in the EU. Food, children’s clothing and some other items have always been zero-rated in Britain”.

Will a VAT cut work? Canada cut its sales tax at the beginning of 2008, but this had modest effects on total spending, according to the ‘Undercover Economist’, Tim Harford interviewed on the BBC Today programme this morning. For a critique of the Canadian tax cuts from a poverty perspective see GrowingGap. Canadian readers: send us your views.

To cut taxes now, taxes have to rise later. Economists describe this as borrowing from ourselves. Spending won’t rise if we fully anticipate the future tax increase. Or at least that’s what some macro-economists say (see Robert Barro). It’s called Ricardian Equivalence (drop that into your next pub conversation on the economic crisis: sure to impress). Economist readers: please up-date us on whether Barro is right.

Will businesses cut prices following a VAT reduction? They are slashing prices in any case, in advance of Xmas – a last ditch hope that the sales can carry them through the new year. Buyers stormed Marks & Spencers last week, following a 20% price cut. So we might all now afford fresh underwear. But will stores cut prices further, or take some of the VAT cut to rebuild their margins?

Ann Pettifor of the New Economics Foundation interviewed on the BBC yesterday was skeptical about tax cuts (Ann was one of the first people to predict this crisis). She believes that people will instead save the VAT cut (i.e. you will still buy the same basket of goods, but now the basket will be cheaper and you won’t add any more items. Your money is then deposited in one of Britain’s hopeless banks or under your mattress). Ann points out that if the money is spent then a lot will go on foreign imports (true, but I don’t think this is necessarily as bad as is often believed. The Americans need help too. I’ll do my bit by buying a new Apple Mac).

Other ideas I have come across: delay VAT payments by small businesses for six months. Many small businesses are penalized by the larger firms not paying their suppliers on time (a zero-cost way for the latter to fund themselves). Peter Mandelson promised a crack down, but doesn’t seem to have achieved much yet. In the recession of the early 1990s, small business failures were running at a 1,000 a week. So maybe government could help with a delay in VAT payments. Housebuilders want a continuation of the present holiday on stamp duty to get the housing market re-started. Readers might like to comment on the merits of each.

But there are two ideas from the Get Fair campaign that I really like.

First, immediately invest £4bn in measures to halve child poverty by 2010. Child poverty costs at least £25 billion each year in losses to the Exchequer and in reduced GDP, according to research from the Joseph Rowntree foundation. So spending tax revenue on eliminating child poverty now would actually save public money in the future. Surely a good idea.

Second, Get Fair says improve the take-up of existing benefits: they estimate that this would help 500,000 pensioners out of poverty. Here in the UK we have just had Remembrance Sunday, a day on which we remember those who gave their lives to defend Britain – especially in the Two World Wars. A 20-year old in 1940, is now 88. Helping our pensioners now, especially those in poverty (2.5 million of them) will be one of our last chances to thank their generation.

In the discussion of my recent post about bottled water I mentioned that sales of bottled water at Manchester University support water pumps in Africa. Specifically, Playpump, a wonderful invention from South Africa.

As children spin on a roundabout, clean water is pumped from underground into storage tanks. The pumps cost about US$9,500 to install. They are much faster and pump at a more reliable rate than hand-driven pumps, and can supply up to 1,400 litres of water an hour.

Better water infrastructure in Africa not only reduces the incidence of the main water-borne illnesses, but also reduces the amount of time that communities spend collecting water from (often dirty) ponds and rivers. Since water collection is often an activity for girls, requiring them to walk many hours when water is inaccessible, it provides more time for them – including more time in school. More information on Playpump can be found here.

The UK has got a lot richer over the last twenty years – we are the world’s fifth richest country – but not fairer. Inequality has risen, and 12.8 million Brits live in poverty (30% of children, and 17% of older folk). That’s the message of Get Fair – a national campaign calling for an end to poverty in the UK by 2020.

The coalition now consists of more than 50 organizations. They work on poverty right across society, including among children, older people, refugees, and the disabled. Get Fair includes housing groups, as well as faith and community groups.

Two at least of their recommendations could help Britain dig itself out the recession, namely invest £4bn measures to halve child poverty by 2010 and improve the take-up of existing benefits (they estimate that this would help 500,000 pensioners out of poverty).

On 4 October, Britain’s biggest ever event to end child poverty was held in Trafalgar Square, London, organized by End Child Poverty. And Poverty Action Week takes place 31 January to 8 February 2009, organized by Church Action on Poverty.

That’s one in three children, according to the Campaign to End Child Poverty, a coalition of more than 130 organisations including Barnardo’s, Unicef and the NSPCC. The BBC has reproduced their map of child poverty hot spots here.

They have data on every parliamentary constituency in the UK. Their new figures show that 174 constituencies have 50 per cent or more children living in (or on the brink) of poverty. Their report says:

“Birmingham Ladywood tops the list of the grim league table with 81 per cent – or 28,420 – of its children in struggling families. And within Ladywood one ward, Aston, has 87 per cent of its youngsters struggling to get by. But this is still not the most concentrated area of child poverty. An estimated 98 per cent of children living in two zones in Glasgow Baillieston – Central Easterhouse and North Barlarnark and Easterhouse South – are either in poverty or in working families that are struggling to get by”.

This might focus politicians minds, as we move towards a general election by, at the latest, mid 2010. But will there be any cash left in the treasury after bailing out Britain’s feckless banks, we wonder?

Every minute another woman dies during childbirth – or soon after from easily preventable causes. Many die before childbirth, in pregnancy. Death takes mothers, daughters, and wives from their communities, leaving widowers and orphans.

Today in Manchester I heard Sarah Brown and Brigid McConville speak movingly of their work with the White Ribbon Alliance for safe motherhood. WRA is an international alliance with members in 91 countries and National Alliances established in 11 – ranging from Burkina Faso to Bangladesh to Zambia. It is taking the campaign to New York this week for the UN Millennium Development Goal summit to push on the maternal health goal (MDG 5). Improvement has been limited: DFID sums it up:

“. There are two targets: one to reduce maternal deaths and the other to provide universal access to reproductive health. Little progress has been made over the past two decades and MDG 5 is severely off-track”.

Poverty is a cause of maternal death. An African woman has a 1 in 16 chance of dying from a pregnancy while a European has a 1 in 1,800 risk. And maternal mortality is a cause of poverty. The household loses not only a human life, but the income that the woman’s livelihood provides. The Chronic Poverty Report cites health crises, and the associated impact on the household’s resources (including health fees), as a big initiator of the descent into chronic poverty. This makes for hungry and sick children. Orphans are more likely to die after their mother’s death – their chance of death is three times the average for children in the 1-5 age group. One mother’s death thereby ripples across the generations.

Former IMF chief economist, Ken Rogoff worries that the dollar is headed for another dip in today’s FT (go here). He says:

“If the US were an emerging market country, its exchange rate would be plummeting and interest rates on government debt would be soaring”.

Instead the dollar has strengthened over the last month. But he doesn’t think this will continue. Rogoff is worth listening to: over the summer he said a major US financial institution would fail before the end of the year (reported here). And this has now come to pass (with more on the way?).

What does the financial crisis mean for the poor? Earlier in the year we commented on the big rise in the number of people using America’s food banks (see our February and US archives). The US government buys surplus food for distribution through organizations like America’s Second Harvest — and these are facing heavy demand in areas worst hit by the house-price collapse.

Given the US slowdown, unemployment will rise further. With few if any savings, plus the cost of health care (and the fact that many Americans are uninsured), unemployment can quickly push people into poverty. The US prides itself on social mobility (the rags-to-riches story that all those self-help books play upon). But only 6% of children born to parents with a family income at the very bottom move to the very top (see the Economic Mobility Project here). It’s actually a very static society, especially for African Americans.

Unemployment is, in turn, pushing up the default rate in the already hard-pressed mortgage market. This adds to pressure on mortgage-bonds and the balance sheet of the financial sector.

Putting in place effective safety nets for those on low-incomes could help establish a floor under house prices (and thereby indirectly help the dollar, which is Ken Rogoff’s concern). Since many low-income families were lured into mortgages they cannot now afford through so-called ‘teaser rates’ (low interest rates to suck them into debt) they deserve as much help as the banks — if not more.

But we fear that any help will be squeezed out by the fiscal costs of the financial crisis itself (not to mention the continued cost of Iraq: see Joe Stiglitz here on the ‘three trillion dollar war’). And it is very likely that the US will exercise even less voice in international development, since its bilateral and multilateral aid commitments will come under budgetary pressure as any new administration (be it democratic or republican) will focus on domestic priorities first. The bottom line: it’s not just America’s poor who are hammered, but the world’s poor as well.

In the 2007 Budget Gordon Brown, then Chancellor of the Exchequer, announced that the 22p tax band would be reduced to 20p in the pound as of April 2008. In addition, the 10p tax band was to be abolished. The aim was to create a simplified and fairer tax system and raise some much needed revenue for the government – they expect to make £3.7bn from the changes. A year has passed since then and the planned tax system changes have been implemented but only now are we beginning to understand the implications of these changes. As the tax band changes have the effect of ‘making poor people poorer’ (to quote Labour MP David Anderson) Brown is facing a substantial backlash from backbench Labour MPs, other political parties and the general public.

In essence, what the tax band changes amount to is a reduction in the tax paid by higher earners and an increase in the tax paid by those on the lowest incomes. Let me repeat that. A Labour government, which is intent on tackling poverty, has implemented a change to the tax system which sees the better off in society gain money and the poor lose money. As The Times put it, it amounts to a robbing Peter to pay Paul type of situation but in this case Peter was notably poorer than Paul in the first place. It has been estimated by the Institute of Fiscal Studies (IFS) that 5.3 million households will be negatively affected by these changes with poor households losing out by up to £232 per year. This is shameful enough but when this is juxtaposed against the fact that the tax changes mean that everyone earning above £41,435 will have an extra £297 a year in their pockets there is little wonder there has been a substantial and sustained backlash.

The Government’s position on the emerging tax rebellion has changed several times in the last few weeks from outright denial that the changes will negatively affect anybody to some form of commitment to do something about it somehow in the future. For now, Gordon Brown and the current Chancellor of the Exchequer, Alistair Darling, are attempting to stave off criticism by pointing to the role of the tax credits system in making up any short fall in household income. Admittedly this would be an effective mechanism if the tax credit system was infallible and was available to all workers and if homo-sapiens became homo economicus – the optimum economic being – but this is not the case. Current estimates suggest that around only half of those eligible for Working Tax Credit actually claim it. In my work with working poor households in Manchester I found that many households did not claim tax credits because of (i) a perceived stigma around being seen to claim benefits despite the fact that they were a form of in-work support and (ii) because of the complex nature of the system. In addition, the recent problem of tax credit overpayment had dented the confidence of many low income households in the system and has put many off from claiming. In the last three years nearly £6 billion has been overpaid to hundreds of thousands of households. The government’s attempts to claim this back from low income households has exacerbated the experience of poverty for many recipients. Some claimants have even been forced to sell or re-mortgage their homes to (more…)

There is growing interest in the potential role of social transfers in tackling poverty and vulnerability in developing countries. Social transfers are tax-financed transfers in cash of kind paid to households in poverty. Enhancing the purchasing power of those in poverty to help them reach a basic living standard is hardly a novel approach to poverty reduction in developed countries. In Sub-Saharan Africa, some policy makers have reservations on whether this approach could work. In many countries in the region, poverty incidence is high, fiscal resources are very limited, and delivery capacity is threadbare. Several pilot social transfer programmes in Zambia, Kenya, Ghana, and Ethiopia are producing much needed knowledge on how these restrictions can be lifted, and on the effectiveness of social transfers.

Francie Lund has written a book on the policy debates and processes leading to the introduction of the Child Support Grant in 1998 (Changing Social Policy. The Child Support Grant in South Africa, Human Sciences Research Council of South Africa, 2008, http://www.hsrcpress.za). The Grant now reaches 8 million children in poor households in South Africa. As Chair of the group tasked with producing a review and report for the Government of South Africa which led to the Grant (the 1995 Lund Committee for Child and Family Support), a leading social policy academic, and a ‘welfare activist’ (her words), no one could claim to be better placed to write this book. The book is written with the immediacy of a main protagonist, but with the critical detachment of a researcher, a rare feat. For anyone interested in how we are to address child poverty, in South Africa and elsewhere, this is a ‘must read’. The book will also be of interest and benefit to those concerned with policy processes in developing countries.

South Africa has relied on social transfers as the main response to poverty since the 1920’s when an old age grant was introduced for poor whites. Over time, grants reached other groups, and the end of apartheid in 1994 led to the elimination in racial discrimination in access to the grants. The Lund Committee was set up to consider what support the new administration should give children in poverty. Its conclusion was that a social transfer paid to the caregiver, but which ‘followed the child’ was the most effective strategy. The extension of the rights of children which the transfer represents will, in the years to come, be acknowledged as a milestone.

Did you catch the sporting event of the year on Sunday? The event that every participant had been in ‘training’ for all their lives. No it wasn’t the African Cup of Nations or even the Super Bowl. It was the world’s first Poverty Olympics held in Vancouver. Here participants were invited to take part in events such as the welfare hurdles and the poverty line high jump and were supported by mascots such as Itchy the Bedbug and Creepy the Cockroach.

However, behind the rather amusing fascade lies a very serious message. The event was organised by the Poverty Olympics Organizing Committee — a group of citizens and community organisations campaigning against increased levels of poverty (in a city that has just been voted as the world’s most ‘liveable’ by the UN). In 2010 Vancouver is to host the Winter Olympics. At the time of the bid promises were made that the Olympics would leave a positive legacy for all of Vancouver’s residents. This included building more social housing, reducing homelessness, and making sure poor people weren’t displaced by Olympics-driven development. However, at the same time the British Columbia Government cut social housing spending and social assistance was made increasingly difficult to obtain.

The aim of the Poverty Olympics was to highlight the growing social inequalities in the city as well as the plight of the poor in what is one of the world’s most affluent cities. The event focussed particularly on those living in Downtown Eastside — the city’s poorest neighbourhood — which was singled out last year by the United Nations Population Fund as a sign of ‘trouble in paradise’ where (the HIV rate is 30% — the same as Botswana’s). Homelessness in Vancouver doubled between 2002 and 2005. And levels of child poverty are the highest in Canada.

The Poverty Olympics Organizing Committee argues that the cost of reducing poverty in Vancouver would be around $1.34 billion. This includes building more social housing, increasing welfare entitlements and ending barriers to welfare. Sounds a lot our thinking. But this amount pales into insignificance when compared to the more than $4.5 billion that has been spent on the Winter Olympics (and the provincial and federal budget surpluses for 2006/07 — of $4 billion and $14 billion respectively). This is money that they could spend but haven’t.

For Vancouver’s rich the city may well be the most ‘liveable’ in the world. But its inner city poor tell a different story. For them Vancouver represents poor housing, poor services, low life expectancy and the failure of local and national government to provide the basic means of subsistence. Hopefully the campaign will go some way to highlighting the poverty amidst plenty which continues to exist, and is indeed increasing, in many of the world’s most affluent cities — and not just in Vancouver. London 2012 take note!!

To read more about Vancouver’s poverty and the campaign against the city’s uneven economic development and rising social inequalities see http://povertyolympics.ca/

Ed Balls gave a speech yesterday on child poverty before launching his Children’s Plan today in the Commons. He recommitted to the aim of halving child poverty in the UK by 2010 and eradicating it by 2020. Meanwhile, research by the Department for Work and Pensions has shown that 41% of the British public believe that there is ‘very little’ child poverty in Britain (approximately 3 million children are classified as being in poverty – roughly a third of the total). Around 52% think that there is quite a lot of poverty. Voters are also increasingly likely to blame the poor themselves.

There are a couple of articles in the Guardian about it, one on Ed Ball’s speech here, and a comment by Polly Toynbee here.